Friday, May 14, 2021

Should Your Financial Plan Address Addiction?




“It’s what you learn after you know it all that counts.” ~ Earl Weaver, Hall of Fame Major League Baseball Manager

Question: Our oldest son deals with substance abuse issues. He’s doing well now, but what if something changes in the future? Are there ways to protect his inheritance?

Answer: Substance abuse is a sensitive matter in many ways. Understanding how your financial plan will function for families with exposure to or a history of substance abuse can be a challenge. When drafting documents consideration can be given as to how to address situations if a child or grandchild develops an addiction problem, or relapses while in recovery.



Trust documents can be designed to offer important protections for beneficiaries. Distributions may be left to the trustee’s discretion if you’re unable to act on your own behalf due to either disability or death. The trustee’s powers can also be absolute or limited in nature according to your wishes.

Some argue that if a trustee has discretion to make and withhold distributions, there isn’t a need for specific substance abuse provisions. Specific previsions could wrongly stigmatize someone because they’re being treated differently than other family members. Customary distributions include provisions for health, education, maintenance and support for a beneficiary. This could include the use of funds for treatment programs. For obvious reasons, solutions can be awkward, complicated, and often elusive. Why You Might Include Specific Provisions

Trustees and other fiduciaries (someone acting on your behalf) may be unwilling to cut off distributions to a trust beneficiary with an addiction problem, fearing longterm disputes and litigation. Even professional trustees such as banks, trust companies, and attorneys may be hesitant to forcefully intervene with a substance-abusing trust beneficiary or even hesitate to act as trustee in situations when there’s a beneficiary with a known addiction problem.

Trustees and fiduciaries, whether it’s a family member, friend or financial institution, may not have the necessary knowledge of treatment options for different kinds of substance abuse. For example, a trustee selected for his or her financial expertise, good judgment and knowledge of family matters may have no understanding of how to deal with opiate addiction in a 20-year-old beneficiary residing in another state. This is why some families often insist on having express provisions in their planning documents to address these issues. But How? Here are a few commonly used provisions: • Required Testing: If substance abuse is suspected, the trustee may request or require the beneficiary to undergo testing to qualify for distributions. Consent to disclose test results to the trustee is usually required to resume distributions. Definition of Dependence or Addiction: Guidelines to establish evaluation of whether a beneficiary’s substance abuse has had consequences that could lead to actual harm to the beneficiary or his or her assets are given to the trustee. • Suspension of Discretionary and Mandatory Distributions: Until test results are received, and in the event of adverse findings, the trustee may be authorized to withhold distributions. • Treatment: Substance abuse provisions often authorize or require a beneficiary to enter or complete a treatment or counseling program before distributions may resume.

Understandably, trustees may be given wide latitude to determine what constitutes successful completion of a treatment program.

Provisions usually require a fiduciary to make a number of difficult determinations that may fall outside their comfort zone and area of expertise. Raising the topic with a beneficiary along with other subjective questions such as, “What treatment options should be considered?” and “What determines if treatment was successful?” could be awkward. Only as Good as the Gatekeeper

Planning protections for a child or grandchild facing addiction are only as strong as the individual or group charged with administering their trust. Any one legal structure may lead to good or bad results, depending upon the willingness of the decision-maker to actively engage with the beneficiary, obtain professional advice, and remain involved over the lifetime of the beneficiary.

Deciding who can serve as the decision maker can be a daunting task. Many families dealing with substance abuse issues don’t have a single individual with the knowledge and disposition to act as fiduciary for a person with substance abuse problems. Families may find it necessary to assemble a “committee,” drawing from legal counsel, financial advisors, treatment professionals and others to be the joint decision makers for family members strug- gling with drug and alcohol addiction.

In spite of these challenges, concerns regarding the subject of substance abuse, addiction and how to address them in your financial plan should be raised openly in planning discussions with your CERTIFIED FINANCIAL PLANNER™ practitioner, attorney, and other planning professionals.

Open communication produces a well thought out plan to reflect and represent your priorities. Having the challenging and often difficult conversations before they’re necessary is typically the best approach. You and your financial team have worked hard to assemble a plan for all seasons, incorporating the heartbreak of substance abuse in your planning documents may be prudent. Stay focused and plan accordingly.

Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and are subject to change at any time.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC, 606 Bald Eagle Drive, Suite 401, Marco Island, FL 34145. She may be reached by phone at 239-389- 1041 or email Website:

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